Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #121
Date: Thu, 22 Jan 1998 22:34:06 -0500 (EST)
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persfin-digest Thursday, January 22 1998 Volume 04 : Number 121
IN THIS ISSUE:
ADVERTISEMENT: MCI INFOSOURCE
Rental Property "Rules of Thumb"
Re: choosing mutual funds?
Roth IRA limit?
Re: CD for 10 years
Re: CD for 10 yrs..
Re: CD for 10 years
Re: ROTH IRA vs Municipal Bonds..... the same??
AT&T
Re: Best Long-distance Phone Service
Re: Best Long-distance Phone Service?
Re: Deductibility Of Charity Auction?
voltage converter for Nepal
FSA Question - Can We Participate in Two Employer Plans?
Re: ROTH IRA vs Municipal Bonds..... the same??
Loan from 401(K)?
Long Distance Deals to Call Canada and/or China?
re: home equity loan for car purchase
re: mortgage refinance
re: mortgage refinance inquiry
Re: Dental Insurance for Family of 3
RE: Variable annuity, 401(k) or Roth IRA?
Re: Catastrophic Health Care Coverage?
Re: transfer of 403B
Re: ROTH IRA vs Municipal Bonds..... the same??
Re: question about short term capital gain distributions
re: Hume Files
Re: Rebate cards and bills scheme?
Re: Quicken & mutual fund returns
Re: Investments for a Baby
RE: Credit Card Late Charges?
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Date: Thu, 22 Jan 1998 20:39:12 -0500 (EST)
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------------------------------
Date: Thu, 22 Jan 1998 20:40:33 -0500 (EST)
From: Steve Crossland <stevec@onr.com>
Subject: Rental Property "Rules of Thumb"
>From: Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson)
>> Properties priced at 7-8 times the gross you expect to collect annually
>> can work as an investment, but this is only a rule of thumb..-
- -------------
>I recently saw the above "rule of thumb" in another news group and I am
>interested in this "rule of thumb" and others like it.
>I would very much like to see some "rules of thumb" for return
>on investment and all the other things I hear the more sophisticated
investors
>talking about,...
I'll share my thoughts:
Disclaimer - assume I'm a fool
.
The 7 or 8 times rule (Gross Rent Multiplier - GRM) is good. I don't
lock myself into any one criteria though - just because the numbers work
doesn't mean the investment will be a smart one - and vice versa.
There are all sorts of factors to look at.
Property Value: Is is stable, falling, or rising? In times of rapid
value change, the GRM is less important - or even irrelevant. Example:
in 1994 I bought a house in central Austin where property values were
appreciating at about $1500 per month. I paid 58K, sold for 89K less
than two years later. I could have let it sit empty and still done well.
The $825/mo rent was just extra gravy. Likewise, even if you cash flow a
few hundred $ a month, what good will that be if the property value
drops $20K over two years and rents drop? This can happen if a factory
closes, military base shuts down, etc. Assuming a stable area with
average value appreciation and stable rents, the GRM is a good indicator
to use but should not be the only. And find out what the CURRENT market
rents are for the AREA you buy in - your subject property may have
inflated or under market rents which will affect your decision.
Property Condition: Make sure that, other than obvious cosmetic items,
there are no major mechanical problems or quirks - ESPECIALLY things
that will cause a tenant to complain (low water pressure, slow drains,
inadequate A/C-Heat for the size, poor insulation, drafty doors and
windows, plugs that don't work, ugly neighbors, etc.) If you can, ask
the current residents about any problems while the seller/landlord is
not around. Ask yourself, "will my renter be happy here?". If not,
forget it.
Seller Financing: Last Friday I bought a house and the Seller is going
to carry a 15 yr note with a 30 month ballon at 8% interest. I paid all
the closing atttorney costs which were only about $500. She sold it to
me for about $15K below market value and is absolutely delighted with
the deal. We closed in 5 days. This is the type of deal everyone should
really look for as it is a win/win. The lady wanted out of the property,
had no money to prepare it properly for sale (new roof, carpet, paint),
dreaded the traditional list-with-an-agent experience, owned it free and
clear, and only needed about $7K to move with. I hate dealing with
Lenders and Title companies and the accompanying fees. We both saved
time and money. The amount by which she discounted the price was, to
her, a bargain in return for a quick close and avoiding the entire
ordeal of having to list it, pay the traditional closing costs and
commissions, and endure the uncertainty and nail biting that many
sellers feel (see more below). I already have the house rented for a
$200+ month positive cash flow (even after the payment for the credit
card check I wrote for the down payment and closing costs) and have
instant equity. In two years I'll sell it, pay her off, and use the
profit to buy more property. This is how to really make money with
houses.
Note: This deal is the type that Carlton Sheets and the like try to
teach - zero down - it's not hard to do if you just go and do it. I'll
never use a bank loan again. A friend of mine found a deal like this
herself last week just by asking "are you selling the house?" at a
garage sale. It was a family of out-of-town kids whose elderly mother
had just died and left the house - they were more than happy to carry a
note on the property and be done with their business so fast - everybody
is happy - it's a win/win deal..
Don't Be Afraid: As an willing and ready investor, you have a different
sort of currency which is "time savings and hassle avoidance". The time
and hassle that you can save a seller is worth money to that seller -
sometimes a lot of money. If you are a seller, how much would it be
worth to you to close on your house in 5 days and avoid the entire
traditional listing/closing process? By being ready and willing to close
quickly on a deal, you have something of value. Matched with a seller in
the right situation (can owner carry), both of you come out ahead even
if the selling price is 8% to 12% OR MORE below what the market value
is. That is because the *transaction* does not have to pay the average
8% to 12% closing costs, commissions, and fees that ordinarily occur -
most of which are not necessary. Contrary to popular belief, it is not
the buyer and seller who pay those costs, but the *transaction*. Think
about it. You can put that piece of the pie in your own pocket instead.
I've read in this very digest denouncements of the above method, (zero
downs, etc.) as being bogus, impossible to find, etc. They are not.
Anybody can learn to do it.
Property Management Skills: Finding the best deal in the world won't
matter if you screw it up with poor tenant relations and dumb management
decisions. Hire a property manager if you don't deal well with people
and can't handle grief. Treat your tenants like gold - they are the ones
that really make your investment work for you. And don't try to skimp on
every little repair cost - you'll probably regret it in the end. Use a
real plumber, electrician, etc and have your work done right. Make sure
your property is in compliance with local, state, and federal rent laws.
Gut Instinct: I've passed on deals that looked excellent on paper - but
something just didn't feel right. Trust your instincts. If it doesn't
feel right, be willing to walk away and forget about it.
There's more but I've rambled on enough.
- --
*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*
Steve Crossland stevec@onr.com
Crossland Real Estate * Austin TX * (512) 891-9111
Property Management * Leasing * Sales
http://www.io.com/~cre
*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*
------------------------------
Date: Thu, 22 Jan 1998 20:41:09 -0500 (EST)
From: "Ken Meinken" <kmeinken@bigfoot.com>
Subject: Re: choosing mutual funds?
> From: Ryo Imamura <imamura@elwha.evergreen.edu>
>
> How do you folks go about choosing a mutual fund? Do you actually analyze
> the individual investments or look at the past profit rates? About 3
> years ago, I put $10K a piece into a CGM mutual fund and an Invesco one.
> Today the CGM fund is worth a little more than 15K whereas the Invesco
> fund is worth more than 18K. I have no idea why there is such a
> disparity. Should I move my CGM money into the Invesco fund or let them
> ride in the hopes that they will kinda even out in the long run? I
> initially chose those two funds because of a rating comparison in an
> investment magazine. I wonder if I am especially unknowledgeable about
> investments relying on minimal information and blind faith or if I am
> like most mutual fund investors who have been riding out the wonderful
> wave of profits.
I don't put too much faith in magazine ratings. They are almost all
accomplished by looking backward and most studies point out that last
year's good performers probably won't be next year's best performers.
Look at Fidelity: they went from having some of the best performing
funds to have almost all subperformers.
I would never expect two funds to perform the same way. Most
investors would not want them to perform the same way: if they
expected that, they would only have bought one of the funds. Most
people buy different funds so that they have some diversification. A
fund that does while in one type environment won't do as well in
another type of environment.
You didn't say which particular Invesco and CGM funds you bought, but
I wouldn't expect the two families to be very similar. Even two
similar funds in the same family rarely have similar performances.
Look at Fidelity Equity Income and Fidelity Equity Income II,
Vanguard Windsor and Winsdor II.
If you have significant amounts invested I think it would be worth
investing more time in studying investing.
Good luck,
Ken
------------------------------
Date: Thu, 22 Jan 1998 20:41:33 -0500 (EST)
From: Roberta Healey <rhealey@MAIL.COLGATE.EDU>
Subject: Roth IRA limit?
I got some Roth IRA material from a mutual fund recently and it stated
that the combined yearly income limit for traditional and Roth IRA's was
$2,000 or 100% of your income, whichever was less.
Is this right? You can't open a Roth IRA if you already have $2000/year
going into traditional IRAs (unless you do a rollover)?
Roberta Healey
rhealey@mail.colgate.edu
------------------------------
Date: Thu, 22 Jan 1998 20:42:50 -0500 (EST)
From: "Ken Meinken" <kmeinken@bigfoot.com>
Subject: Re: CD for 10 years
> From: BOB FORD <BOB_FORD@compuserve.com>
>
> However with the bonds, it is possible to get a good interest rate AND
> appreciation just like stocks. Lets say you buy bonds at face value of
> $1000 each at 10 percent interest. Interest rates drop sometime during
> that 10 year period to 5 percent. You can sell the bond for $2000. You
> will have made 100 percent appreciation on the bond and 10 percent
> interest when you owned it.
>
Bob,
that is oversimplification. I don't think you will find anybody who
will pay you $2000 for a $1000 bond maturing in 10-x years, because
they know they are going to lose half of their principle to only get
a 5% return. Quite a losing proposition. When you consider that
bonds probably can't go to half of their current interest rate, it
makes even less sense.
Besides, if you sell a bond (that you bought for your interest
income), what are you going to invest your money in once you sell the
bond? Something yielding half of what you had? Seems more sensible
to hold it until maturity IMO, especially for someone asking
questions about CDs. Now making a profit off of buying and selling
bonds is a full time job for some bond house traders....but I just
read about one of them losing something like $100 million because he
guessed wrong. Not the focus of this mailing list, I think.
Ken
------------------------------
Date: Thu, 22 Jan 1998 20:43:17 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: CD for 10 yrs..
>>Discover is offerring 6.74% for 10 yrs on their CDs. I am retiring next year
>>at 62 and looking for income, would this be good deal?
>
>Surrrrrrre........then you won't have *any* income for 10 yrs.
Why do you say that? All CDs I've ever seen allow one to take out
*interest* (which is most often accrued daily and credited monthly) at
any time. It's withdrawal of *principal* that is not permitted (or
only allowed with penalty).
Of course, one should still read the fine print on exactly what kind
of withdrawals (principal and/or interest) are allowed and what if any
penalties attend each type of withdrawal.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Thu, 22 Jan 1998 20:43:52 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: CD for 10 years
>appreciation just like stocks. Lets say you buy bonds at face value of
>$1000 each at 10 percent interest. Interest rates drop sometime during
>that 10 year period to 5 percent. You can sell the bond for $2000. You
>will have made 100 percent appreciation on the bond and 10 percent
>interest when you owned it.
I have to differ with this. Even assuming the best case for price
appreciation -- a zero-coupon bond with interest rates dropping from
10% to 5% the day after you buy it, the price for $1000 face will only
go from $385 to $614. Bonds that actually pay a coupon will swing
significantly less, and the closer to the bond's maturity date that
the interest rate change occurs, the less effect it'll have. So I
just can't see a 10 year bond getting anything close to 100% price
appreciation on an interest rate drop from 10% to 5%, and certainly
not if you've held the bond for a few years before the rate drop
happens.
Charts I've seen show a 7% 10 year bond appreciating or depreciating
about 7.5% for each 1 point change in interest rates (higher coupon
bonds will swing less, lower coupon bonds would swing more). So
again, even if rates dropped from 10% to 5% the day after you bought
the bond, it would "only" appreciate around 40%.
Someone who feels like pulling out a NPV calculator can get more exact
numbers :-)
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Thu, 22 Jan 1998 20:44:22 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: ROTH IRA vs Municipal Bonds..... the same??
>What is the difference between a ROTH IRA and a municipal bond?
Lots. A muni is a particular security. A Roth IRA is an account that
is granted special tax treatment. Almost any kind of security can be
purchased in a Roth IRA.
>Both are funded with post-tax dollars. Both accrue tax free interest (with
>non-AMT bonds) federal and state. Neither are insured.
Roth IRAs do not accrue tax-free interest. They don't accrue interest at all.
They provide tax-free earnings. What the earnings are (interest, dividends,
capital gains) depends entirely how one chooses to invest the money you
place into a Roth IRA.
>I can redeem the bonds whenever I desire. The ROTH "rate" may vary while the
>Bond coupon is fixed for the life of the bond.
There is no such thing as "the Roth 'rate'". The return on investment
one receives from a Roth IRA is wholly dependent on what investment
securities one chooses to purchase in the account. One could buy a
corporate bond (which will have a higher coupon than munis) and get
fixed rate of return higher than your muni. Or one could buy a
diversified mutual fund portfolio which while more risky is likely to
far outperform a muni over the long run. Or you could buy Treasuries, or
individual stocks, or...
>Other than the bond coupon vs the ROTH interest rate, is there a tangible
>difference between these two investments that would indicate the ROTH is a
>superior investment vehicle?
A Roth is far more flexible since just about any type of investment
can be purchased within it, and the investments within it can be
changed with no tax consequences whatsoever.
In general, I think you are comparing apples to oranges.
Now, if you want to compare a muni to (say) a CD held within a Roth
IRA, that's a different story and a meaningful comparison can be made.
But to compare a muni to the concept of a Roth IRA doesn't quite make
that much sense to me.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Thu, 22 Jan 1998 20:44:53 -0500 (EST)
From: dollymadis@megsinet.net
Subject: AT&T
>I currently have $0.10/min. 24 hours a day with no monthly >fee from AT&T.
>Normally, there is a $4.95 monthly fee, but if you ask, they will >waive
it
>for 6 months. I'm planning on calling back at the end of 6 >months and
>getting them to waive it again.
I recently signed up for this program and as an incentive AT&T is
retroactively refunding me the savings I would have received for the last
three months if I would have been on this program without charging me the
$4.95 for each of the three months. Nothing was mentioned about waiving the
monthly fee but rest assured I intend on looking into it.
Tom Gilbertson
------------------------------
Date: Thu, 22 Jan 1998 21:02:29 -0500 (EST)
From: "Lloyd Colston" <colston@viagrafix.com>
Subject: Re: Best Long-distance Phone Service
If you are a business, see http://ld.net/?kc5fm for 9.9 cent long
distance. If you are not a business, see the business opportunity
link to show you how. :)
There is no monthly fee and no signup fee.
Let me know how more I can help.
Lloyd Colston Excellence is not an accident
Pryor, OK USA social worker, writer, editor
------------------------------
Date: Thu, 22 Jan 1998 21:10:44 -0500 (EST)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Best Long-distance Phone Service?
> ..............................
> I currently have $0.10/min. 24 hours a day with no monthly fee from AT&T.
> Normally, there is a $4.95 monthly fee, but if you ask, they will waive it
> for 6 months. I'm planning on calling back at the end of 6 months and
> getting them to waive it again.
> Chris Yohn
> yohn@saturn.med.nyu.edu
>
Is this a residential phone? What is the name of the "plan" for this rate?
TIA
Chen
------------------------------
Date: Thu, 22 Jan 1998 21:11:48 -0500 (EST)
From: Harry Matthews <matthews@panix.com>
Subject: Re: Deductibility Of Charity Auction?
>
> I went to a charity auction in which goods and services were donated to a
> non-profit school and then sold to the highest bidder. All proceeds of the
> sale went directly to the school. I purchased a week at someone's vacation
> home in the Caribbean. I paid $800 and the market value would have been
> about $2000. Can I use all or part of the $800 as a charitable deduction?
In an word, "NO." The donor of a gift to a charitable auction can deduct
its fair market value -- generally, what a qualified dealer or appraiser
says it's worth.
But a buyer gains no tax advantage unless he or she knowingly pays more
than fair market value for the same product or service. In your case, the
donor of the prize could deduct $2,000 (assuming the donor can document
this cost), but you can deduct bubkes, though you can congratulate
yourself on a terrific bargain.
------------------------------
Date: Thu, 22 Jan 1998 21:12:39 -0500 (EST)
From: Ryo Imamura <imamura@elwha.evergreen.edu>
Subject: voltage converter for Nepal
I saw on the www that in Nepal they use two types of electrical plugs -
two circular prongs and two fatter circular prongs. Radio Shack has an
international voltage converter that contains 4 adapters, one of which is
two-pronged and is for Europe and the Middle East. I cannot tell if the
two-pronged plug is the thinner or fatter one. But evidently, whichever
one it is, it seems that I still need the other two-pronged plug in
Nepal. Does anyone know exactly what kind of adapter(s) I need? Perhaps I
should wait until I get to Nepal and purchase one there. Thanks.
BTW, thanks to everyone who so kindly responded to my earlier inquiry
about Nepal.
Ryo Imamura
imamura@elwha.evergreen.edu
------------------------------
Date: Thu, 22 Jan 1998 21:15:00 -0500 (EST)
From: Steven Klein <SKLEIN@snm.org>
Subject: FSA Question - Can We Participate in Two Employer Plans?
My employer offers a dependent care flexible spending account (FSA).
My wife's employer also offers this plan (both offer upto $5000.00 per
calender year).
My dependent care expenses come to around $11000.00 per year.
Is it legal for both my wife and myself to participate each of our
employers plan?
Steve Klein
------------------------------
Date: Thu, 22 Jan 1998 21:15:46 -0500 (EST)
From: Steve Foulks <steve_foulks@up.bresnan.net>
Subject: Re: ROTH IRA vs Municipal Bonds..... the same??
>
>Municipal bonds, purchased in this state, are exempt from both federal and
>state income tax. They are, of course, purchased with after-tax dollars. I
>tend to hold them till maturity although they are semi-liquid (as would be an
>equity).
>
>What is the difference between a ROTH IRA and a municipal bond?
>
>Both are funded with post-tax dollars. Both accrue tax free interest (with
>non-AMT bonds) federal and state. Neither are insured.
>
>I can redeem the bonds whenever I desire. The ROTH "rate" may vary while the
>Bond coupon is fixed for the life of the bond.
>
>Other than the bond coupon vs the ROTH interest rate, is there a tangible
>difference between these two investments that would indicate the ROTH is a
>superior investment vehicle?
Of course there are vast differences between ROTH IRA's (a tax advantaged
investment mechanism) and a bond issued by a state or it's subdivision. I
think you were looking for a discussion about which would be a better
investment.
In my own opinion the ROTH IRA is vastly superior for you, because it
allows you to earn a higher yield on bonds with lower risk, which are also
more liquid. Compare a municipal bond with a U.S. Government bond today of
equal maturity length. The U.S. government has a higher after tax yield if
invested in a Roth IRA, and I would argue also that they are less risky and
certainly more liquid. Assuming that you are "risk averse", it is a "no
brainer", invest in the ROTH. In addition Roth's allow you to take much
greater investment risk than municipal bonds do, which is a reason why I
personally would prefer a ROTH to a municipal bond.
Of course the ROTH has a limit of only $2,000 a year, and there is an
income limit also. After you fund your ROTH with U.S. government bonds,
invest the rest of your money in muni's. If you begin investing in a ROTH
and find out it isn't for you (and I can't imagine why), you can take all
of your investment out tax and penalty free!!
Steven M. Foulks, CPA, CFP, PhD
Professor of Accounting & Finance
Northern Michigan University
<http://www.acs.nmu.edu/instruct/business/sfoulks/default.html/>
------------------------------
Date: Thu, 22 Jan 1998 21:16:24 -0500 (EST)
From: "Suhas Joshi" <suhas@hotmail.com>
Subject: Loan from 401(K)?
I currently contribute to 401(K). However, beginning Fall, I might go
back full-time to school. At this time, can I take out loan from my
401(K)? How much can I take out? What will be the repayment like? For
two years, when I will be in school, I wont be able to make any
repayments. Is that OK? Are there any "gotchas"? If anybody has gone
through this situation, I would appreciate inputs.
Thanks !
------------------------------
Date: Thu, 22 Jan 1998 21:17:04 -0500 (EST)
From: ming yang <ming_y@gennum.com>
Subject: Long Distance Deals to Call Canada and/or China?
Anybody know any good deals to call Canada and/or China?
------------------------------
Date: Thu, 22 Jan 1998 21:17:42 -0500 (EST)
From: stockr1@juno.com (Russ Stock)
Subject: re: home equity loan for car purchase
Robert asked how much equity is needed to take an equity loan for car
purcase. Many lenders will go to 125% of the value of the home (but that
is not tax deductible). You can only borrow up to 100% of the purchase
price/value to keep the deductibility.
Russ Stock
Mortgage Banker
Stockr1@juno.com
Stockr1@aol.com
Date: Fri, 16 Jan 1998 18:33:12 -0500 (EST)
From: "Robert Loeser" <Robert_Loeser@medec.com>
Subject: Home Equity Loan for Car Purchase I just bought a new home with
5% down, and have made two mortgage payments. I'm sure that I have very
little equity. I've heard that if you take a home equity loan to buy a
car, the interest is deductible. My question is "how much equity do you
need before you can take a home equity loan?"
------------------------------
Date: Thu, 22 Jan 1998 21:18:35 -0500 (EST)
From: stockr1@juno.com (Russ Stock)
Subject: re: mortgage refinance
Andrea asked about how to calculate the benefits of refinancing.
.....what is taken into account,and how.
Basically, you can subtract the difference in the old and new interest
rates, and multiply that times your loan amount. This will give you your
annual savings. Refinancing costs will be approx $1600. You can now
make an educated decision regarding your savings vs costs vs time
anticipated remaining in the home. If you will save
$1500 /yr, and costs are $1600, and you plan on staying in the home for
even 2 years, it is worth it to refinance.
If you need further information, e-mail me directly, and I will respond
more specifically.
Russ Stock
Mortgage Banker
Stockr1@juno.com
Stockr1@aol.com
------------------------------
Date: Thu, 22 Jan 1998 21:19:10 -0500 (EST)
From: Jason Kaufman <JHK@copper-mt.com>
Subject: re: mortgage refinance inquiry
In answer to the question:
Does anyone know of a formula for determining the benefits of a
mortgage refinance? I realize that variables such as current and
proposed interest rate, points, fees and expected years remaining
in the dwelling all need to be considered - but I'm not sure how
to weigh each item. Also, I realize that many web calculators
exist which will perform such a calculation. I'm not really
interested in having the work done for me, rather I'd like to know
what's involved in the calculation and do it myself.
Regards, Andrea Welch
Check out http://www.homepath.com where you can find everything you
ever wanted to know.
Jason H. Kaufman
Copper Mountain Trust Corporation
Portland, Oregon 97204
E-mail: JHK@copper-mt.com
Company Web Page: http://www.copper-mt.com
------------------------------
Date: Thu, 22 Jan 1998 21:20:12 -0500 (EST)
From: Jason Kaufman <JHK@copper-mt.com>
Subject: Re: Dental Insurance for Family of 3
In answer to this post:
I'm looking for a good comprehensive dental plan for my family of three.
Sorry Gary, but I do not know of any place that offers dental insurance
to individuals. I worked in the insurance industry for a while and the
only individual insurance is health. If anyone else knows, please
inform.
Jason H. Kaufman
Copper Mountain Trust Corporation
Portland, Oregon 97204
------------------------------
Date: Thu, 22 Jan 1998 21:22:57 -0500 (EST)
From: Jason Kaufman <JHK@copper-mt.com>
Subject: RE: Variable annuity, 401(k) or Roth IRA?
>>If I understand the Roth IRA correctly, it seems like my best vehicle
for future retirement planning. I have two questions:
Should I stop contributing to the 401(k) and instead direct retirement
savings to the Roth IRA?
Sounds like the matching 401(k) (even if you have to wait a few years)
is your best option. Also, you did not mention your husbands status
with regards to retirement planning.
Is it possible or advisable to move the funds currently in the Variable
life account to a Roth IRA? How would I go about doing so?
You can't do this. The IRS looks at like for like exchanges (1035 IRS
Code). That is annuity for annuity and life insurance for life
insurance. Also, even though you are past the surrender period, you
will be taxed on the earnings that you withdraw and also the 10% IRS
penalty for early withdrawal before 59 1/2. If you can live with...I
could not.
Jason H. Kaufman
Portland, Oregon 97204
------------------------------
Date: Thu, 22 Jan 1998 21:24:17 -0500 (EST)
From: "Cal Lester" <cal_lester@email.msn.com>
Subject: Re: Catastrophic Health Care Coverage?
>I recently discovered that my 47-year old sister does not have health
>insurance. Can anyone give me an estimate of how much a no-frills,
>high-deductible, catastrophic health-care policy would cost per month? She
>is a non-smoker. Any web site suggestions would also be appreciated.
>
>>>> Rates vary not only from State to State, but for various zip
codes in the same State. In addition, one would have to know her medical
backround as well. Oh by the way, no-frill medical is an oximoron! !! Can
she bear the cost of a high deductible??
Cal Lester CLU
------------------------------
Date: Thu, 22 Jan 1998 22:27:14 -0500 (EST)
From: Jim Garcia <jimgarci@pacbell.net>
Subject: Re: transfer of 403B
> My 403B plan at work was invested in Fidelity Select Computers...
> I filled out my forms (to move the money to Vanguard) in early November.
> They were received by Vanguard on 11/26/97, so I assumed that everything
> was fine. On 1/2/98 I received a letter from Fidelity, dated 12/24/97
> saying they could not process this without my signature (my signature was
> on the form submitted), so now it is 2 months later and still nothing has
> been done. AND..look what happened to Select Computer in the last two months..
I can sympathize with you, BUT. I have a 403B with Fidelity and when I
actually "talked" to someone (about requesting a form to transfer money
INTO Fidelity from another 403B account) I was told to get a form from the
company I was transferring FROM. I just checked the Fidelity paperwork,
and it DOES say that to sell shares you have to make the request in
writing.
Jim Garcia jimgarcia@pacbell.net
------------------------------
Date: Thu, 22 Jan 1998 22:28:13 -0500 (EST)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: ROTH IRA vs Municipal Bonds..... the same??
I don't think that there is an absolute answer applicable to all states. It
will depend on your states tax rate, the credit ratings of the bonds that
your state issues and if your state will treat the Roth "income" the same
as the Feds do.
To answer your specific question compare the coupon rate or YTM of the
municipal bond with the coupon rate of a comparable T-Bond or Government
agency bond and see which will yield the higher income. You might want to
even consider investment grade corporate bonds as well in your survey.
(Some might question whether bonds are what you want in your Roth but for
the moment I'll assume that you have decided that Bonds are right for you)
One down side of muni bonds is that the Feds require you to inculde muni
bond interest in figuring how much of your social security is taxable (and
possibly other things as well). At the present they don't do this for Roth
Income (but I suspect that they will in time)
Avrum Lapin
Upland., CA
------------------------------
Date: Thu, 22 Jan 1998 22:28:34 -0500 (EST)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: question about short term capital gain distributions
> > Has anyone looked at the 1997 tax forms yet as far as short
> >term capital gain distributions from a mutual fund? As far as I can
>
> Taxwise, mutual funds DO NOT make short-term capital gain distributions.
> Yes, your fund will show a ST gain distribution on its year end statement.
> However, it is for your information only. When the 1099-DIV (which is all
> that counts, tax-wise) is issued, the STG dist is bundled into ordinary
> income. In fact, short-term gains distributed by mutual funds *totally*
> lose their capital gain character and cannot be used to soak up capital
> losses. They become totally ordinary income (see IRS Pub 564).
> ................................
This is correct, in theory. But I noticed that in this year's year-end
statements and 1099 from some of the mutual funds, they have used "ST Capital
gains" for the 28% capital gains; and the "LT Capital gains" for the 20%
gains. And they lumped the real ST capital gains with the dividends (since
they are taxed as ordinary income anyway).
Chen
------------------------------
Date: Thu, 22 Jan 1998 22:29:24 -0500 (EST)
From: Randy Barnes <rbarnes@atl.mindspring.com>
Subject: re: Hume Files
QuotedFrom: Steve Brodeur <sbrodeur@draper.com>
>Subject: Hume Super Investor files?
Has anybody ever heard of (or ordered, read, used...) the Super Investor
Files produced by the Hume Group?
<snip,snip>
free and all additional files cost $39.95 ($34.95?). Buy only what you
want, stop when you want, the first one is yours to keep, etc......
I'm curious, but the price is pretty steep. Anybody got more info?
Steve
Hi Steve,
I've got that one, and I'll bet it's 10 years old. I have a couple of
comments.
First, I'd want to know if the rest of the reports are as dated. The
markets have been through some dramatic changes and shifts over the
recent past. Has Hume kept up? Are these strategies still working?
If you think $39.95 is steep, you probably will have many sleepless
nights chasing investment strategies that can take allot of money to
pull off, even if you manage to reduce your risk.
I think a better idea is to put the money into an account for 12 months
and see if you still want this stuff. Meanwhile, pick a strategy or
topic that interests you and learn more through FREE library books,
college libraries, Internet searches, local clubs, a friendly stock
broker, and on and on.
Next year you'll have $500, and can still buy the "Super Investor Files"
if you want, but you'll have accumulated so much Super Investor Knowlege
that you won't need'em any more.
If you want the best investment strategy I've found online ( and I spend
100 hrs+ a month at this,) check out http://www.taylortrader.com The
site is dynamite. Save the $39.95. (and send half to IRA!)
Good Luck,
- -Randy Barnes
------------------------------
Date: Thu, 22 Jan 1998 22:30:05 -0500 (EST)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Rebate cards and bills scheme?
> I'm sure this has come up before, but I'd like to get feedback on the
> following scheme. It seems absurdly simple, so my apologies if
> everyone's doing it, and I'm just not "with it":
>
> - - obtain a credit card that has an attractive rebate, like:
> - Discover Private Issue
> - Centura CashMax
> - - have all monthly bills set up to auto-draft from the card, via either:
> - the credit card itself (an actual Visa transaction), or
> - obtaining the Routing/Account number for the credit card through
> the checks the lender invariably provides (would this be treated as
> a cash advance if utilized?)
> - - pay the credit card from a checking account
> - - earn the rebate
The first thing you have to find out from the credit card company is whether
you can set up an auto-draft from the card.
If you can, then you need to find out what fees, if any, the card company will
charge you for the transaction. If the usual transaction fee for cash advance
applies -- a min. of $2-10 -- then it will not be worth the rebate in most
case.
Also, cash advances starts accruing interest from the date it is posted. So,
it will be difficult to time your payment to arrive on the date the
transaction is posted -- unless you are going to "pre-pay".
Chen
------------------------------
Date: Thu, 22 Jan 1998 22:30:29 -0500 (EST)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Quicken & mutual fund returns
In reply to an earlier query regarding how quicken calculates
gains on the mutual funds.
I've seen two replies, both of which went on to explain
how reinvested dividends increase one's cost basis, so
that the _gains_ reported by quicken are correct from the
taxation point of view. This is correct. However, my
understanding of the original question is that the fellow
who asked realized this fact. he seemed to be asking how
one can get Quicken to report your total-return, not your
capital gain.
Going back to the example, 10k invested, 2k increase,
then 2k distribution, which is reinvested. The original
10k is the amount _invested_. And, up until the 2k
distribution and reinvestment, it is also the cost-basis.
After the distribution and reinvestment, the _cost_basis_
has increased to 12k, and the capital-gains are reduced
to zero, as discussed. However, the _total_return_ is
still 2k/10k, since the amount _invested_ has not increased.
Quicken is capable of reporting _total_return_. It is
one of the report options. I believe that ROI is calculated
differently in reports from how it is calculated in the
portfolio view. The one you want is in the report, not
the portfolio. Both calculations are correct, it is just
that in the portfolio view, it counts reinvestments as
new investments into the fund (which is correct from the
tax point of view), whereas in the report view, it only
counts cash purchases as new investments, and re-investments
of distributions are not counted - which is what you want
for total-return.
Now if only we could get it to report tax-adjusted returns...
- --D
------------------------------
Date: Thu, 22 Jan 1998 22:31:07 -0500 (EST)
From: Jeff Morgan <Morgajs@parsec.com>
Subject: Re: Investments for a Baby
>
><...>
>My mother-in-law also has opened an American Century Gift Trust for
both
>girls. Tax free, but the money belongs to them at 18.
><...>
>
>Scott Barnett
>sab@crisp.net
A common misconception.
Giftrust is not a UGMA, and unlike a UGMA account, does not
automatically become property of the child at age of majority,
although the trust maturity date (minimum 10 years) may be the
child's 18th birthday by coincidence or design.
One can establish a Giftrust to mature on the childs 41st
birthday, or on Christmas in the year the child turns 27,
or July 4th, 2056, etc.
One could set up several Giftrusts, maturing on the child's birthdays
every five years, from age 35 to age 55, if desired.
American Century (800) 345-2021 will verify this.
Cheers.
- --
Jeff Morgan - morgajs@parsec.com
Ask me about the Rice Bowl Effect.
------------------------------
Date: Thu, 22 Jan 1998 22:32:11 -0500 (EST)
From: "John S. Rullo" <jsrullo@enteract.com>
Subject: RE: Credit Card Late Charges?
Leigh Menconi writes,
> Ever since my two credit cards instituted late payment charges of $20,
> it seems that my payments have been missing the due date by one day even
> if I mail it a week ahead. It's happened often enough now that I'm
> beginning to wonder if this is some kind of conspiracy to make more
> money off my account because I pay it off every month and don't incur
> finance charges. Has anyone had a similar experience?
There is an interesting article in Worth Magazine (Feb 98) by Andrew
Tobias about this very subject. It states that $millions are made each
year from collecting late charges. There seems to be a big difference
between the companys that issue the card and the companys that handle
their paperwork.
The article basically implies that you dump them for somebody that
treats you right, but after trying to resolve it with a rep. What cards
are they if I may ask?
John
------------------------------
End of persfin-digest V4 #121
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